Tokyo firms ahead of FOMC, BOJ

Gold miners gain in Sydney on Barrick-Homestake merger

By

MarikoAndo

TOKYO (CBS.MW) - Tokyo stocks ended slightly higher Tuesday but the trading was quiet as investors sidelined themselves ahead of policy-setting meetings by both the U.S. and Japanese central banks later this week.

The U.S. Federal Open Market Committee meeting is scheduled to be held Tuesday and Wednesday. Economists expect the Fed to cut U.S. interest rates by 25 to 50 basis points. The Bank of Japan will convene its Policy Board meeting Thursday.

Sentiment was also subdued ahead of a weekend meeting between Japanese Prime Minister Junichiro Koizumi and U.S. President George W. Bush in Washington, where Japan's economic policies are likely to be discussed.

The Nikkei Average rose 82.35 points, or 0.64 percent, at 12,978.82 points. The broader TOPIX added 0.45 percent to 1,295.93.

"A majority of the market players are expecting the Fed to announce 50 basis point cut so if it turns out to be a 25-basis point cut, the move could slightly disappoint the market. But in any case, the positive reaction from the rate-cut is likely to be short-lived, as it's widely expected and also eaten by ongoing fears over the economic outlook," said Masatoshi Sato, an equity information manager from Mizuho Investors Securities.

Despite the Nasdaq's firmer close, investors stayed away from leading Japanese technology shares after U.S. chipmaker Applied Micro Circuits on Monday cut its first-quarter financial targets due to continued weak demand for its chips.

Computer and chip giant NEC
NIPNY
fell 0.6 percent to 1,727 yen after it said it's considering listing on the New York Stock Exchange. See full story.

Banks were also under pressure, hit by ongoing pessimism over their efforts to clean up bad debt.

"It looks extremely difficult for these debt-ridden banks to sort out mounting bad loans given this worsening economic conditions. And even if they try, it could also kill some borrowers... bad loan clean up is not as easy as it sounds," Mizuho Investors' Sato said.

But machinery makers and steel makers drew buying as investors sought less-volatile sectors in which to park their money. Among those gainers, shares of Kawasaki Heavy
KWHIY, -2.75%
jumped 2.4 percent to 213 yen.

Gold miners gain in Sydney on Barrick-Homestake merger

In Australia, the All Ordinaries Index closed up 0.43 percent at 3,370.00. The country's largest retailer Coles Myer
CM, +1.11%
rebounded 3 percent to 6.29 Australian dollars after falling to a 13-month low of A$5.97 earlier in the day following Monday's profit warning.

In South Korea, the benchmark Kospi dropped 1.56 percent to close at 588.71 points, dragged down by SK Telecom
SKM, +0.72%
which slipped 1.5 percent.

SK Telecom's shares came under pressure after it announced a share buyback program. South Korea's top cell phone firm is repurchasing 3.56 million shares from the market between May 2 and June 28 to boost its flagging share price, according to a Reuters report.

Taiwanese stocks tumbled, with the key Weighted Index falling 2.43 percent to close at 4,785.12 points.

While broad-based technology shares suffered from selling, Taiwan Semiconductor Manufacturing
TSM, +0.49%
outperformed the market with shares rising half a percent as the company went ex-dividend on Tuesday. Shares also got a boost on a Financial Times report the world's largest microchip foundry expects to report a profit for the second quarter of 2001.

But most other technology shares headed south. United Microelectronics
UMC, +1.09%
the world's second biggest foundry, fell 4.6 percent while Macronix International
MXICY
dropped 4 percent.

In Hong Kong, investors returned from a three-day holiday with selling in mind. The Hang Seng Index dropped 1.61 percent, or 212.05 points, to close at 12,961.97. Hong Kong's stock market was closed Monday for the Dragon Boat Festival holiday.

Banks and properties stocks weakened despite expectations that the U.S. central bank would announce a further interest rate cut later this week. Shares of HSBC
HBC, -2.10%
Europe's largest bank, fell 1.1 percent and Bank of East Asia
BKEAF, -3.66%
shed 1.6 percent. Property developer, New World Development
NDVLY, +0.00%
was down 2 percent.

New Zealand's NZ Top 40 closed up 0.26 percent at 2,046.68 points. Despite the index's firmer close, however, market heavyweight Telecom NZ
NZT, -1.33%
which has a 23 percent weighting in the benchmark index, saw its shares slip 0.6 percent.

The dollar was trading at 123.51 in late afternoon Tokyo, down from 123.85 yen in New York late Monday. It changed hands at 124.02 yen late Monday in Tokyo.

Intraday Data provided by SIX Financial Information and subject to terms of use. Historical and current end-of-day data provided by SIX Financial Information. All quotes are in local exchange time. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only. Intraday data delayed at least 15 minutes or per exchange requirements.